Repossession on European Property

What will happen if I go into arrears on my Spanish Mortgage?

If you don’t pay your mortgage arrears will mount on your account and following a period of greater than three months your lender can commence repossession proceedings. Many courts in Europe are inundated with repossession cases so the process can take some time.

Repossession, Repossession, Repossession

The process of repossession in Spain is long winded and costly, these costs are added to the loan outstanding. Each loan has a penal rate written into the deed. This penal rate is applied on top of interest and capital due from the minute a loan is late or fully in arrears. Normal Penal Rates are between 3% to 12% but can be higher and are recorded at signing of the mortgage deed.

Once repossessed your lender will then likely market the property. Many properties sold in possession are sold at a far reduced value often around 60% of open market value. This can increase losses for both the Bank and the borrower.

Reality of Defaulting On Foreign Mortgage

Since the financial crisis in 2008 Spain has seen well over a quarter of a million properties repossessed. A staggering figure, and are large proportion of these repossessions are foreign owned properties. Many British and Irish borrowers feel they can “hand back the keys” and walk away from the property thinking the debt is settled and they cannot be pursued in their home country.

European Banks are beginning to become more pro-active in the debt collection. The dust has settled on property market and general economic decline on the continent and Banks have been given the ultimatum to tidy up their loan books. Some have even been sold to Private Equity funds who are looking to make a return for their investors.

How The Banks Can Pursue You

In terms of debt perusal in the UK or Ireland lenders can look to recover your home assets and many lenders will appoint UK Debt Collection agents and this could lead to an effect on your home country credit report. The Spanish lender can look to put a charge on your property even if it already has an existing mortgage and can even enforce an Attachment of Earnings Order.

This will become a more prevalent problem and we urge overseas borrowers not to ignore their liabilities abroad. 

European Banks have the ability to pursue overseas borrowers for outstanding debts.

It is as simple as that.

Swiss Franc Mortgage contracts which involved thousands of borrowers are in default, across Cyprus and other Balkan and European Countries.

Back in April 2016 we released a blog on the issue regarding Swiss Franc Mortgages, and as we predicted the situation has worsened. Many borrowers still continue to struggle to repay their loans, even with record low interest rates.

The Once & Past Dream

The idea of owning a property in the sun was a dream for thousands across the UK, dreaming of a place to settle, and retire, a retreat for the grandchildren to visit.

For many, they would have borrowed and mortgaged the property usually through a Euro product, but as we know pre-2008 lending processes were “loose” and the idea of a Swiss Franc Mortgage appealed to many, not realising the predicament they would find themselves a few years down the line.

No one could have foreseen the events of 2008 and thus many borrowers have now become victims of circumstance.

Swiss Franc Mortgage Products

These Swiss Franc Mortgage Products were sold on the basis on the exchange rate at that time which included a variable interest rate. Since then most clients which have contacted us are dealing with 3 major problems:

1. Rise in the interest rate on their mortgage, not highlighted at the time.
2. Exchange Rate Depreciation – £ to SwFr 40% from 2008 to date.
3. The Property is in negative equity anyway i.e. a mortgage debt greater than market valuation.

Movement on Swiss Franc Mortgage Agreements

Early last year Cypriot Banks became more aggressive with those parties struggling, serving Writs  on borrowers defaulting on their loan agreements . This often involved appointing UK Debt Collection Agents and Solicitors which exposed people for the first time at home in the UK…… Assets and incomes then become at risk.

Many overseas borrowers with Swiss Franc Mortgages are struggling to find a route out of this issue.

Thankfully, there are now options for borrowers in this situation. There is the on-going legal battles in the Supreme Court but the key here is to do something now and take control.